Analysts say new policies will continue to broaden financial channels for small and private companies this year, as policymakers look to balance responsible lending with the need to guide adequate funds into dynamic parts of the real economy.
Their words come after a top-level comprehensive guideline last week explored diversified fundraising methods, including boosting the role of non-bank financial institutions.
Direct financing, such as capital raising activities through stocks and bonds, could play a bigger role to increase the flow of funds into small businesses and the private sector, and serve as a supplement to the long-term denominated 260 trillion yuan ($38.4 trillion) banking sector in China's financial system, said a guideline, issued by the Communist Party of China Central Committee and the State Council on Thursday night.
Policymakers are even considering the removal of some existing limits for the country's 16.4 trillion yuan insurance fund, allowing investment in stocks, according to the document. The government will also actively nurture angel investors and venture capital companies that invest in innovative private technology firms, it said.
Private banks will be allowed to borrow more capital at lower interest rates from the People's Bank of China, the country's central bank, to afford them the same preferential conditions as State-owned and large banks. The authority will later revise policies to support the agricultural sector and small businesses.
A nationwide financing guarantee fund of 66.1 million yuan, supported by fiscal capital, will also play a role in reducing risk exposure. The fund will be supervised by the central bank's credit information system, according to the guideline.
"With the guarantee, commercial banks will be more proactive to provide fast loans for small businesses with lower interest rates," said Wang Zhiwei, general manager of the inclusive financing department at Hua Xia Bank.
Preparation of the document was led by the banking and insurance watchdog, with coordination between several macroeconomic administrative departments such as the Ministry of Finance and the central bank.
It was based on opinions collected from managers in small and private companies, as well as in commercial banks.
China's financial regulators have been trying to stave off a potential credit crunch since last summer.
Currently, banks are trying to balance safe loans with political calls to support economic growth. Meanwhile, borrowers are facing a slowdown in profits coupled with a lack of cheap finance, according to some senior officials who participated in the drafting process.
The Financial Stability and Development Committee under the State Council sent out seven groups of officials to different provinces in November. They talked with business managers and bank staff to learn of the issues lenders are facing.
"It is a very comprehensive guideline that needs time to be learned and implemented, but it also raises some very real problems, such as increased collateral requirements and strict discipline over loan officers. That makes banks hesitate when approving loans," said Zhou Xuedong, director-general of the PBOC General Administration Department and the central bank's spokesman.
Loan applicants from the private sector have complained that as well as rejection, approved loans are coming with higher collateral requirements and tightened credit checks. Bank loan officers are being asked to take lifelong responsibility for the loans they authorize.
Official encouragement of lending since last year appears to be having an effect. In January, banks' lending in renminbi rose to 3.57 trillion yuan－the most since statistics began in 1992, the PBOC said on Friday.
Falling financial market interest rates have also supported the huge credit increase. In January, the central bank cut reserve requirement ratios for commercial banks.
For private companies with difficulties accessing bank loans, issuing new types of bonds－such as a privately raised commercial bond－and accelerating IPOs through the upcoming science and technology innovation board, are helpful, said Dong Dengxin, director of the Finance and Securities Institute at Wuhan University of Science and Technology.